The Race Is On to Reach India's Next Billion Internet Users

Internet Companies Lure New Users With TV Ads, Special Services

From a Google commercial in India, by MullenLowe Lintas Group Credit: MullenLowe Lintas Group

Google TV commercials for India showed people how easy it is to search for cricket scores on its app. Actors in Amazon's ads sang a catchy tune in Hindi to urge skeptics of online shopping to get over their fears—and to remind people that Amazon accepts cash on delivery. Amazon's local rival, Flipkart, bombarded drivers with highway billboards proclaiming its products 100% genuine.

There's a digital revolution happening in India, and internet and tech players are trying everything to entice more people to try online shopping, stream a movie or even just type something into Google's search bar.

They have a dual target. There are the 350 million or so Indians who already use the internet—a number larger than the U.S. population. But there is also the bigger prize to come, the 900 million Indians who aren't online yet.

Ad spending by foreign and local e-commerce players, telecom companies and handset makers is feeding into the advertising boom in India. It's the world's fastest-growing major ad market, where spending is set to expand 15.5% this year to $8.6 billion, according to GroupM.

Often local media buys include traditional formats like TV, as many executives remain convinced that's the best way to reach the masses. Digital advertising is still a small percentage of overall spending—forecast to be 12.7% of the total this year. But GroupM projects that small piece of the pie will jump 47.5% in 2016.

Given the masses of people gearing up to come online, many say the industry and brands will have to play catch-up.

"Are we prepared for it? No, I don't think so," said Charulata Ravi Kumar, CEO of Razorfish India. "And you can't be prepared for it. How do you prepare for such large numbers?" Ogilvy & Mather India CEO Kunal Jeswani says that "consumers are moving faster on digital than either marketers or advertising agencies."

KPMG forecasts India's wireless internet users will more than double by 2020, reaching 790 million. There are still barriers, like poor connectivity; the average internet speed in India is about a fifth of the U.S. rate, as KPMG noted in a report with the Federation of Indian Chambers of Commerce and Industry. And the expense of data is still an issue in a country with an average per capita income of less than $1,600 annually.

On the upside, affordable high-quality Android phones are flooding the market in a country where many skipped over computers and went straight to mobile. (A local company has even promised a smartphone for $4, though there's skepticism about whether that's actually possible.)

Internet adoption is also expected to get a boost from this year's rollout of 4G. And many will be closely watching the introduction of 4G by local player Reliance Jio, which has ambitiously promised its service will have 100 million users in 12 months. India's government has its own push with a Digital India plan to bring rural areas online.

Getting it right in India

For U.S. internet players, the pressure is on in India, partly because of its sheer size, but also because Silicon Valley lost out in the other massive Asian market. In China, the government put up a Great Firewall to block Google, Facebook, YouTube, Twitter and the like.

Foreign players are working furiously to seem locally relevant in India, with advertising steeped in local touches and unusual outreach catering to India's specificities.

Like Amazon and local e-commerce player Flipkart, Uber accepts cash in many locations, because many Indians don't have credit cards. Free public Wi-Fi is rare, so Google has helped install it in 15 train stations, with plans for dozens more this year. It also hopes to send balloons up in rural areas to give people internet access there. Amazon just said it is investing an extra $3 billion in India.

Sometimes efforts to reach India's masses have missed the mark. Faced with slowing growth in its No. 2 market, Greater China, Apple is looking more closely at India, where only 2% of deliveries are iPhones. It pushed to import used iPhones into the country; India, which is pushing a Make in India effort, said no.

But public opinion turned against it, and regulators shot Facebook's effort down because it violated the principle of net neutrality, or equal internet access for all.

That said, research analyst Neil Shah of Counterpoint Research says, "I haven't seen Facebook adoption going down because of that." Facebook has over 130 million users in the country—its second biggest market after the U.S.

Still, the size is there but the money isn't yet; after bringing masses of users aboard there will be other challenges to tackle. Counterpoint estimates that Facebook's average revenue per user in India late last year was just 25 cents per quarter, compared with $10.40 in the U.S.